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This problem involves preparing a cash budget for ABC Co. based on the given data. We need to calculate the cash flow from April to June 2020 to determine how much bank facilities (overdrafts) the company will require each month. Here's the step-by-step breakdown:

### Step-by-Step Analysis:

#### (a) Given Data:
- Sales, Purchases, and Wages are provided for each month.
- The months we focus on are **April, May, and June**.

| Month       | Sales (Rs.) | Purchases (Rs.) | Wages (Rs.) |
|-------------|-------------|-----------------|-------------|
| February    | 180,000     | 124,800         | 12,000      |
| March       | 192,000     | 144,000         | 14,000      |
| April       | 108,000     | 243,000         | 11,000      |
| May         | 174,000     | 246,000         | 10,000      |
| June        | 126,000     | 268,000         | 15,000      |

#### (c) Collection and Payment Pattern:
- 50% of sales are collected in the following month, and the remaining 50% in the month after that.
- Creditors (suppliers) are paid in the month following the purchase.

#### (d) Opening Cash Balance:
- Cash at bank on **April 1, 2020** is Rs. 25,000.

### Now, let's prepare the cash budget:

1. **Cash Collections from Sales**:
   - For April: 50% of March sales + 50% of February sales.
   - For May: 50% of April sales + 50% of March sales.
   - For June: 50% of May sales + 50% of April sales.

2. **Payments to Creditors (Purchases)**:
   - For April: March purchases.
   - For May: April purchases.
   - For June: May purchases.

3. **Wages Payments**:
   - Wages are paid in the same month as incurred.

4. **Opening Cash Balance for Each Month**:
   - April opening balance: Rs. 25,000.
   - May and June balances depend on the cash balance at the end of the previous month.

I'll compute the required details now.Here is the cash budget for April to June 2020:

1. **April 2020:**
   - Opening Balance: Rs. 25,000
   - Cash Inflows (from sales collections): Rs. 186,000
   - Cash Outflows (purchases + wages): Rs. 155,000
   - **Closing Balance: Rs. 56,000**

2. **May 2020:**
   - Opening Balance: Rs. 56,000
   - Cash Inflows: Rs. 150,000
   - Cash Outflows: Rs. 253,000
   - **Closing Balance: Rs. -47,000** (indicating a deficit and the need for overdraft)

3. **June 2020:**
   - Opening Balance: Rs. -47,000 (overdraft)
   - Cash Inflows: Rs. 141,000
   - Cash Outflows: Rs. 261,000
   - **Closing Balance: Rs. -167,000** (further overdraft required)

### Summary:
- By **June 2020**, the company will need an overdraft facility of Rs. 167,000 to cover its expenses.

Would you like more details or have any specific questions about the calculations?

Here are some related questions:
1. How could reducing purchases help improve cash flow in May and June?
2. What impact would changing the sales collection period have on cash flow?
3. How could adjusting wage payments affect the overdraft requirement?
4. Could delaying creditor payments reduce the need for an overdraft?
5. What would be the impact of increasing the initial cash balance?

**Tip**: Monitoring and adjusting the timing of sales collections and payments can significantly improve cash flow management.

ABC Co. wishes to arrange overdraft facilities with its bankers during the period April to June 2020, when it will be manufacturing mostly for stock. Prepare a cash budget for the above period from the following data, indicating the extent of the bank facilities the company will require at the end of each month.

Learn how to prepare a cash budget for ABC Co. from April to June 2020, taking into account sales, purchases, and wages. This problem involves understanding cash collections, payments to creditors, and managing cash inflows and outflows.

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